Cautious leasing persists, while niche growth drives first-store openings

• Department stores faced significant headwinds amid sluggish consumption, with closures including Galeries Lafayette and Blue Island Mansion. Net absorption totalled 18,700 sqm in Q2 2026, significantly below the three-year average, as retailers remained cautious.
• International luxury brands showed resilience, while domestic brands gained traction in niche segments such as gold and fragrance. Notable first-store openings by Jemper, Borland and Jingjiang highlighted this shift towards culturally integrated concepts.

No new supply drives a gradual decline in vacancy

• No new supply in the quarter. Urban and suburban vacancy rates both dropped 0.3 ppts to 6.7% and 9.4%, respectively.
• External factors have increased leasing volatility, potentially impacting future completions. Only two projects are scheduled for delivery this year. The urban market is likely to see the opening of Dong Wai 39 Mall by the end of 2026.

Rental declines accelerate as even prime assets show pricing flexibility

• The downward rent trajectory persisted. Even prime assets, previously resilient in pricing, have exhibited necessary flexibility in the quarter.
• Rental declines accelerated q-o-q, with the core market contracting most sharply (-2.4%), followed by urban (-2.1%) and suburban (-1.9%) markets.

Outlook: Core market rents to hit annual low

• The downward rent trajectory persists, with the core market projected to see its steepest annual decline by year-end. Rental levels of some repricing assets are unlikely to rebound in the near term.
• Over the next 3–5 years, the urban market will see approximately 1.1 million sqm of new supply. Given commercial land supply constraints within the Fifth Ring Road, Beijing’s urban market remains tight, with vacancy rates expected to remain below 10%.